Monday, 21 October 2013

Greece was as we know plagued by a conference of destabilizing forces

National Bank of Greece group 90-day
past due ratio reached 19.8% in Q2 ’13, more than 10% points off that of the
company peers. In light of this policy development that clearly dissociates NBG
from the rest of the market; the company is steadily reducing loan provision
and charges in Greece in tandem with the improvement in delinquency formation.

Second, on the liquidity front, NBG has
managed to reduce further loan deposit ratios in all three geographies; Greece,
Turkey and SE, pushing the group loan deposit down to 102%, just a whisper away
from 100%. This has been a function of sustained growth deposit gathering in
all three regions and measured deleveraging in Greece and SEE.

As a result, as of June, NBG has managed
to reduce Eurosystem system exposure by €5.4 billion year to date and by €9.2
billion on a year-on-year basis, while suggesting a further reduction by about
€3 billion, combined with a marginal exposure to the ELA of less than €1
billion.

The company continues to rationalize
their cost base with a focus in Greece and SEE jurisdictions. In Greece, NBG
has reduced OpEx by 8% year-on-year in H1 ’13, reaching a cumulative cost
containment of 23% compared to the equivalent period of 2010.

NBG international franchise is
supportive to group profitability. Finansbank’s H1 attributable profit after
tax reached €332 million, posting a 32% increase in local Turkish Lira terms,
despite 2012 being a record year in terms of profitability. Also, SEE has
turned profitable, returning a profit of €6 million relative to a loss of €15
million in H1 ’12.

Finally, the company pro forma Tier-1
stands at 9.2% after netting off fee expenses related to recap operation. The
evolution of core capital during Q2 ’13 was affected by a series of offsetting
factors ranging from the project of IRB implementation to optimize RWAs in
Finansbank to the completed LME on the hybrid and the U.S preference shares,
the small additional DTA and finally, the profit of the quarter.

In July 2013, NBG proceeded to
incorporate the healthy assets of ProBank, a well-run corporate bank with an
attractive SME portfolio, excess liquidity and high quality human capital.
ProBank will further strengthen NBG’s liquidity, allowing the company to
operate better in the current environment, financing the recovery of the Greek
economy.

In addition, NBG will capitalize on
ProBank’s expertise on SMEs, further enhancing the company’s penetration in the
segment. NBG estimates to capture about €110 million of recurring annual
synergies upon full phase out in 2015.

Recovering organic profitability in
Greece supported by lower funding costs and cost cutting, asset qualities
continued improvement in Greece and SEE, with NPL formation at the lowest level
for the past two years, the positive economic time that allows for trading gains,
the reversal provision on sovereign exposure and an increased allowance for
deferred tax assets, reversing negative one off of previous years.

In Greece, NII experienced a second
consecutive quarterly increase, with net interest margin rising to 260 bps from
a top 245 bps in Q4. In Turkey, NII was also up in Euro terms, despite the
deprecation of the try with NIM in Turkey reaching a recent high of 720 bps. In
SEE, NIM has broadly stabilized at a solid 314 basis points. As a result, group
NIM increased to 354 bps, up 18 bps in the quarter.

The improved situation in Greece has
been supported by the continued good performance in Turkey and the return of
southeastern Europe to profitability. Pre-provision earnings exceed provisions
for the first time in two and a half years.

And finally, the stronger operational
outlook is further supported by the best in class liquidity situation at the
capital ratio above the minimum and about to be enhanced even more by a number
of capital actions.